Community Health Systems, Inc. announced Wednesday that an affiliate of the company has signed an agreement to sell Munroe Regional Medical Center to Florida Hospital Ocala, Inc., a subsidiary of Adventist Health System Sunbelt Healthcare Corporation. The transfer of the lease is subject to the consent of the Marion County Hospital District. [Doug Engle/Staff photographer] Next
By Carlos E. Medina
The sale of the lease of Munroe Regional Medical Center to Adventist Health System brings lots of questions. Here are some answers.
For weeks, the worst-kept secret in the healthcare industry in Central Florida was the impending sale of the lease to operate Munroe Regional Medical Center in Ocala.
On Wednesday, official word came that, indeed, Community Health Systems was selling out to Adventist Health System. The sale of the lease to the largest and oldest hospital in Marion County brings with it lots of questions. While the finer points of the deal, including the sales price, are still not public, there is enough out there to answer some of the burning questions.
First, some perspective.
In 2014, CHS took over operations of Munroe under a 40-year lease agreement with the Marion County Hospital District, which still owns the hospital. The Franklin, Tennessee-based company inherited the lease that went to Health Management Associates. CHS closed on the purchase of HMA just after the lease award.
Explore the CHS-Munroe saga in recent years April 20, 2018
When announcing the sale, CHS stated that Adventist would assume the long-term lease. Joe Hanratty, the hospital district attorney, said assumption of the lease would include all its provisions as well. The hospital district, in addition to managing the proceeds of the lease, also enforces the lease agreement and its board of trustees must sign off on the sale before it is final.
What happens to MRMC employees?
In the short-term, nothing.
• Adventist Health System is the parent company of Florida Hospital.
• Munroe would join the West Florida Division as the second largest hospital in the division and the third largest in Adventist Health System.
• The Florida Hospital network includes 27 hospitals, 10 of which are in the West Florida Division and include Florida Hospital Carrollwood, Florida Hospital at Connerton Long Term Acute Care, Florida Hospital Dade City, Florida Hospital Heartland Medical Center Lake Placid, Florida Hospital Heartland Medical Center Sebring, Florida Hospital North Pinellas, Florida Hospital Tampa, Florida Hospital Wauchula, Florida Hospital Wesley Chapel and Florida Hospital Zephyrhills.
Cory Pool, chairman of the MRMC board of trustees, said all employees in good standing would keep their jobs as part of the agreement. But Adventist, in a statement from a Florida Hospital spokeswoman, made no commitment.
“We are not able to comment on any future plans for the hospital or staff as we are in discussion with CHS right now to help with a smooth transition and plan for the hospital’s future,” said Richelle Hoenes, director of corporate communications for Florida Hospital West Florida division.
Florida Hospital planned a review of all hospital services as part of the planned takeover, she said.
Munroe is the biggest private employer in the county, with more than 2,600 workers, according to the Ocala/Marion County Chamber & Economic Partnership.
Who owns Adventist Health System?
Adventist Health System is part of the Seventh-Day Adventist Church and is a not-for-profit entity. It dates back to 1866, when the church established the Western Health Reform Institute in Battle Creek, Michigan. The health resort promoted the church’s health and dietary principles, which focused on nutrition, exercise and hygiene. They offered care and prevention education to both the rich and poor. John Harvey Kellogg was the original superintendent at the facility. He and his brother later founded what became Kellogg’s Co., which still sells the corn flakes invented by John Harvey for use at the resort.
The church opened more healthcare facilities over the years and, in the 1970s, formed Adventist Health System to support those facilities. All Adventists hospitals operate under the same mission: “Extending the Healing Ministry of Christ.”
“Today we continue the tradition of whole-person care by practicing and sharing CREATION Health, a blueprint for living a healthy, happy life based on the principles given in the Bible’s creation story: Choice, Rest, Environment, Activity, Trust, Interpersonal relationships, Outlook and Nutrition,” according to the company’s website.
In 2016, Florida Hospital — the subsidiary of Adventist that would operate MRMC — was the No. 1 hospital in Florida, according to U.S. News and World Report. Adventist is consistently listed among the best places to work.
But the company has fallen short according to regulators. In 2015, Adventist agreed to pay the government $115 million in fines to settle allegations it paid doctors for referrals to hospitals in Florida, North Carolina, Tennessee and Texas. It is against federal law to offer bonuses to doctors for referrals, according to the U.S. Department of Justice’s release announcing the settlement.
In 2004, three Florida companies affiliated with Adventist agreed to pay more than $20 million to settle allegations the companies charged Medicare for ambulance trips that were not necessary.
What does the lease actually require?
A lot. The lease takes up several large volumes, said Curt Bromund, hospital district executive director.
The major provisions include almost $440 million in cash, capital improvements and renovations.
CHS paid the hospital district $212 million in cash upfront. That money is dutifully earning dividends in diverse, low-risk investments. Earnings go to programs in the county that help with mental health/opioid addiction, oral health, diabetes, obesity and tobacco cessation. Bromund said he sees no reason why the investment strategy for that money would change even if MRMC’s operator changes.
The lease calls for $150 million for expansion of Munroe’s main campus and satellite facilities and another $75 million in upgrades and renovations by 2019.
As for the $75 million in upgrades and renovations, more than $40 million is done, said Hanratty.
“They’ve spent about $40, $45 million to upgrade rooms, get new elevators, new electrical and new medical equipment,” he said.
About $12 million went to the 20,000-square-foot neonatal intensive care unit that opened in 2017. Another $26 million is paying for the ongoing expansion and renovation of the hospital’s emergency department. CHS also spent $2 million to buy and demolish a building off of Pine Avenue to facilitate the expansion.
After a tweak to the lease, the hospital district agreed to allow CHS to use $110 million in expansion funds to pay for a 66-bed, full-service hospital at Munroe’s existing TimberRidge Emergency Center on State Road 200. The state denied the initial request, but CHS resubmitted the application.
Will Adventist push for a hospital at TimberRidge?
The plans are now part of the lease, so yes, according to Hanratty.
“We all agreed the TimberRidge was a good idea and (CHS) is still moving forward with a (Certificate of Need). They have indicated that (Adventist) would maintain all the provision of the lease. We’ll find out,” he said.
CHS asked the hospital district trustees to approve a change to the lease that would allow them to spend $110 million on a new hospital at the TimberRidge facility. The district approved the change.
In February, the state’s Agency for Health Care Administration denied the request after initially approving the new hospital. MRMC competitors Ocala Regional Medical Center, West Marion Community Hospital and Citrus Memorial Hospital in Inverness challenged the decision. An administrative law judge ruled in favor of the three hospitals, all owned by Hospital Corporation of America.
Still, CHS vowed to press on and argued along with the hospital district that it did not need state permission to build the hospital. When the Florida Legislature established the district in 1965 it gave them the power to build facilities based on the district’s opinion of need.
Will UF Health Shands continue as a partner?
Part of the original 2014 lease agreement gave UF Health Shands a minority stake in the operating company. The Gainesville-based hospital is an active partner in the operation of the hospital. Shands doctors staff the neonatal intensive care unit at MRMC. The 12-bed NICU opened last June and cares for premature babies and newborns with other health issues. Before, those babies went to Shands. Shands also uses the MRMC helicopter pad to transport patients.
Shands had a preexisting relationship with CHS — through Health Management Associates — for years before the MRMC deal in 2014. CHS bought Health Management in early 2014.
Adventist isn’t saying much about anything.
“We will be able to speak more to that once we are officially closed on the deal,” Hoenes said.
Shands issued a statement late Friday.
“We have a long history of providing care to the residents of Marion County and expect to continue to do so, regardless of the ultimate outcome of the proposed hospital sale,” the statement read.
Will the hospital name change?
No one is saying, “No.”
In the CHS statement announcing the deal, the entity Florida Hospital Ocala, Inc. was named as the subsidiary taking over operation of MRMC. In their filing with the Florida Division of Corporations, Florida Hospital Ocala Inc. states its purpose is to “own and operate Florida Hospital Ocala, a general acute hospital located at 1500 SW 1st Ave, Ocala.” The address is the same as MRMC.
“In regards to the name of the hospital, that is also something we cannot comment on while the work continues between Adventist Health System and the subsidiaries of Community Health Systems with regards to the future of the hospital,” Hoenes said.
Bromund said he was still waiting to get the details on the deal and did not know about plans for the name.
“Considering the scope of this announcement, that’s not something at the top of my priority list,” he said.
Since the 1920s, the hospital and the Munroe name have been synonymous. First opened at Marion General Hospital in 1898, the facility became Munroe Memorial Hospital in 1928. The name honored Ocala banker T.T. Munroe, who championed expansion of the hospital. In 1980, the name changed to Munroe Regional Medical Center.
Nearly all Adventist hospitals in Florida, carry the Florida Hospital name along with the city where they are located. One of the few exceptions to the naming convention is Florida Hospital Waterman in Tavares. Founded in 1938 by Frank Waterman of fountain pen fame, the hospital was Waterman Memorial Hospital until Adventist purchased it in 1992.
Will Adventist pay taxes on MRMC property?
“The lease as it is drawn up states the tenant will pay taxes that are legally owed. So there won’t be any taxes that are owed from a (not-for-profit),” Hanratty said.
That’s a pretty penny in lost tax revenue.
In 2017, CHS paid more than $2 million in property and intangible tax on MRMC and TimberRidge facilities and equipment, said George Albright, Marion County Tax Collector.
The value of MRMC’s main campus in Ocala is more than $78.6 million. Combined, the hospital and its equipment has a value, for tax purposes, of more than $116.7 million, according to Albright.
Hanratty said the district originally wanted to lease the facility to a not-for-profit. However, none applied during the original leasing process.
“Munroe previously didn’t have to pay property taxes because it was a not-for-profit,” Hanratty said. “We haven’t gone through the whole process, but the question is, ‘Do you want to have an operator of the hospital that is financially struggling or an operator that is financially strong?’”
It is one of many issues that will keep the district busy for the near future.
“I’m sure that there are going to be trustees for which that will be an issue, and they will address it with the folks of Florida Hospital,” he said.
Why all the secrecy?
There were lots of reasons, not the least of which is that CHS must comply with Security and Exchange Commission regulations. Because the company’s stock is publicly-traded, CHS must comply with certain rules when making announcements of sales, purchases or other moves that might affect the stock price.
As a governmental body, the hospital district’s board of trustees cannot discuss board business with one another, unless it is at a public meeting.
Since the two parties hope to close the deal by the third quarter, more details will trickle out shortly.
“More will be released,” Hanratty said.